Neville Peterson LLP: Customs and International Trade Law


M E M O R A N D U M
TO:	Clients and Friends of the Firm
FROM:	Neville, Peterson LLP
RE:	U.S. Supreme Court Holds Customs Rulings Not Entitled to Judicial Deference

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     By an 8-to-1 vote, the United States Supreme Court has ruled that United States Customs Service rulings are not entitled to Chevron-type deference by reviewing courts.

     The Court's decision in United States v. Mead Corporation, 553 U.S.__ (June 18, 2001) is a substantial victory for importers. Neville Peterson LLP filed an amicus curiae brief in the action on behalf of several major importers, arguing that no deference was due Customs rulings.

     The Customs Service had urged that reviewing courts, in considering Customs matters, were required to give deference to Customs rulings, in accordance with the rule set out in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). When "Chevron deference" is applicable, reviewing courts are required to grant deferential review to agency determinations, and to uphold those determinations so long as they are "reasonable". While the Supreme Court has ruled that interpretive Customs regulations are entitled to Chevron deference [see United States v. Haggar Apparel Co., 526 U.S. 380 (1999)], no court had ever extended such deference to agency rulings as a class.

     In Mead, a case involving the tariff classification of certain "day planners", the Supreme Court ruled that there was no basis to grant Chevron deference to Customs rulings. Writing for the majority, Justice Souter stated that "[N]o matter which angle we choose for viewing the Customs ruling letter in this case, it fails to qualify under Chevron". The Court held that there was nothing to suggest that Congress meant to delegate authority to Customs to issue classification rulings having the force of law. In addition, rulings only bind the parties to whom they are issued, and may not be relied upon by others. The Court's majority also held that the judicial review conducted by the Court of International Trade (CIT) militates against granting Chevron deference to Customs rulings:

In any event, any precedential claim of a classification ruling is counter-balanced by the provision for independent review of Customs classifications by the CIT, see 28 U.S.C. Sections 2638-2640; the scheme for CIT review includes a provision that treats classification rulings on par with the Secretary's rulings on "valuation, rate of duty, marking, restricted merchandise, entry requirements, drawback, vessel repairs or similar matters," Section 1581(h); See Section 2639(b). It is hard to imagine a Congressional understanding more at odds with the Chevron regime.

In addition, the Court's majority also noted that some 46 different Customs officers issue between 10,000 and 15,000 rulings each year, and concluded that "any suggestion that rulings intended to have the force of law are being churned out at a rate of 10,000 a year at an agency's 46 scattered offices is simply self-refuting."

     The Court's majority did note, however, that Customs rulings would be entitled to "respect" under the doctrine of Skidmore v. Swift & Co., 323 U.S. 134. Under the Skidmore doctrine, an agency's determination is entitled to judicial respect in proportion to its "power to persuade". The Skidmore doctrine, however, merely stands for the unremarkable proposition that a persuasive position should be considered by courts, regardless of the provenance of that position.

     Justice Scalia dissented from the majority view. [This is unsurprising, given his long-standing view that virtually any agency determination should be deferred to by the courts]. Even Justice Scalia seemed to concede, however, that rulings generated at a rate of 10,000 to 15,000 a year are not all automatically entitled to deference, but deserve deference only if they are reviewed at the highest reaches of agency authority, and defended by the agency in court.

     The Supreme Court's Mead decision means that importers can continue to seek Customs rulings without fear that they will damage their chances for successful judicial review of adverse decisions.

     A copy of the decision is available from the Supreme Court's website or from our offices. Our attorneys stand ready to furnish any information which firms may require concerning the decision, or concerning administrative and judicial review of Customs decision.

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